Earnings-related Pensions

Work and Pensions written question – answered on 14th June 2005.

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Photo of David Laws David Laws Shadow Secretary of State for Work and Pensions

To ask the Secretary of State for Work and Pensions if he will estimate the cost of increasing the basic state pension to the level of the guarantee credit, linking that level to the growth of average earnings, abolishing the winter heating allowance and pensioner means-tested benefits, and introducing these charges for all pensioners aged over (a) 65, (b) 67, (c) 70 and (d) 75 years in each year from 2005–06 to 2050–51.

Photo of Stephen Timms Stephen Timms The Minister of State, Department for Work and Pensions

Such information as is available is in the table:

Cost of raising the level of the basic State Pension to the guaranteed credit level while abolishing pension credit and thewinter fuel payment
£ billion
Age: 2005–06 2010–11 2020–21 2030–31 2040–41 2050–51
Over 65 5 10 25 50 80 113
Over 67 5 8 22 43 72 101
Over 70 4 6 17 34 60 84
Over 75 2 4 10 21 40 61

Notes:

1. The costs are for Great Britain in 2005–06 price terms, using the Gross Domestic Product deflator index, rounded to the nearest £1 billion.

2. Basic State Pension (BSP) expenditure is estimated by the Government Actuary's Department, consistent with Budget 2005 assumptions, made using 2003 based population projections.

3. Pension credit and the winter fuel payment expenditures are estimated by the Department for Work and Pensions forecasts based on 2005 Budget assumptions.

4. The eligibility to the basic State Pension is assumed not to change and to achieve the minimum basic State Pension payable (25 per cent.) a person will normally need 10 or 11 qualifying years.

5. It is assumed that the full rate of basic State Pension is increased to the level of the individual guarantee credit in 2005–06 and is increased in line with earnings. Category B pension paid to married women and basic State Pension paid to people entitled to less than the full rate of basic State Pension are increased by the same proportion.

6. Both pension credit and the winter fuel payment are assumed to be abolished for the different age groups from April 2005 with no payments to existing pensioners and no new recipients after 2005.

7. These figures do not take into account any offsets of tax.

8. Entitlement to additional State Pension, housing benefit, council tax benefit and other pensioner benefits are all assumed to be unchanged.

Under this proposal the pensioners already in receipt of pension credit would be no better off and a substantial number of pensioners would be worse off. This would be because they would lose pension credit and winter fuel payments and any additional amounts that pension credit gives them for caring responsibility, disability and certain housing costs.

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